TUCSON MAN FACES FEDERAL CHARGES IN FRAUDULENT STUDENT LOAN SCHEME

TUCSON, Ariz. — Stephen Gallagher, 27, of Tucson, was arrested
on November 9, 2007, and made his initial appearance in U.S. District Court
on November 13, 2007 for allegedly engaging in a fraudulent scheme to obtain
student loan funds which netted him over $624,000. On November 15, 2007, a U.S.
Magistrate Judge set a $5,000 cash or corporate surety bond for his release
which was posted later that day.

The criminal complaint, filed on November 8, 2007, alleges that from 2003 to
2007, Gallagher submitted over 200 student loan applications via the Internet
to various financial institutions. The majority of these loan applications originated
from one of eight different America On-Line (AOL) email accounts registered
in the name of Stephen Gallagher. He submitted loan applications in his own
name as well as in the names of unsuspecting individuals, later adding these
other individuals to his bank account so he could deposit the student loan checks
which were made payable in the name of the borrower. Supporting documentation,
such as proof of employment and residence verification, was submitted to each
financial intuition via FAX machine. Much of this documentation was determined
to be fraudulent.

To date, the Federal Bureau of Investigation has identified approximately 42
fraudulent student loans totaling $624,287.32 to be associated with Gallagher.
Applications were submitted for attendance at Stanford University, George Washington
University, University of Arizona, and Scottsdale Culinary Institute. None of
the individuals listed as the borrower on the student loan applications ever
attended these institutions. The financial institutions that funded the student
loans include: First Marblehead, Wells Fargo, Key Bank, Education Finance Partners,
Suntrust, JP Morgan Chase Bank, Chela Funding, Richland Bank, and Sallie Mae.
In total, Gallagher applied for over $10 million in student loan funds from
these financial institutions.

A conviction for bank fraud carries a maximum penalty of 30 years in federal
prison, a $1 million fine, or both. A criminal complaint is simply the method
by which a person is charged with criminal activity and raises no inference
of guilt. An individual is presumed innocent until competent evidence is presented
to a jury that establishes guilt beyond a reasonable doubt.

The investigation was conducted by the Federal Bureau of Investigation with
assistance from the U.S. Department of Education. The prosecution is being handled
by Eric Markovich, Assistant U.S. Attorney, District of Arizona, Tucson, Ariz.